Renters insurance may seem expensive or even esoteric if
you're among the more than two-thirds of tenants who lack it. But it's the best
way to avoid losing thousands of dollars if you're robbed or your apartment is
damaged by water or fire.
New York apartment dweller Rose Lichter-Marck, 28, had to
pay cash to replace all her furniture, housewares and books after a fire in her
old building that started with an electrical problem on another floor. Cleaning
the smell of smoke out of her clothes cost another $2,000, even with a
"pity discount," because she didn't have insurance, she said. Then
she had to stay with friends and relatives until she found a new
apartment. With insurance, the whole
experience would have been less painful — and less expensive. "They would have put me up in a hotel,
paid for my cleaning and moving fees and even the broker's fee for a new
place," Lichter-Marck said.
A basic policy can be had for 50 cents a day, roughly the
cost of one large pizza per month. But many renters, mostly young adults, think
— incorrectly — that their stuff isn't worth enough to insure, according to
Apartments.com, which found in 2010 that 70 percent of tenants don't buy
"If something were to happen, it's going to cost a lot
more than people imagine to replace dishes, computers, a big-screen TV,
clothing," said Ben Rabinowitz, an agent with Allstate Insurance Co. in
Pikesville, Md. "It begins to really add up."
Renters insurance covers more than what's inside your apartment.
Say you happen to leave the bathtub running too long and water damages your
neighbor's ceiling below; renters insurance will cover the repairs. Or, if your
laptop is stolen from your car, that's generally covered by renters or
homeowners insurance — and not auto insurance.
Here are five steps
to take if you're considering renters insurance:
• INVENTORY YOUR POSSESSIONS: Go room by room and photograph
everything you own to get a sense of how much it would cost to replace all your
things. While you're at it, write down the serial numbers of all your
electronic devices and appliances to guarantee you are fully reimbursed if you
do choose to buy insurance and you suffer a loss.
• SEEK OUT DISCOUNTS: Take note of any special safety
precautions in your building, such as deadbolt locks, a 24-hour doorman or a
sprinkler system, that will earn you a break on your monthly premium. If you
buy coverage from the same company that insures your car or provides you other
types of coverage, that can earn you a multi-policy discount.
• THINK ABOUT PARTYING: If you like to entertain, renters
insurance can be especially helpful. Most policies will offer your guests
medical coverage, so if someone visiting your place slips and smacks his head
on your kitchen counter, his trip to the emergency room will be covered. (And
it's no-fault coverage, so you won't have to wait for a court to decide who is
liable before your insurance kicks in.
• CHOOSE REPLACEMENT VS. ACTUAL VALUE: Most insurers will
cover either your belongings' actual cash value or what it would cost to
replace them. A cash value policy will be cheaper, but the payout for things
you have to replace will be reduced by how much they've depreciated since you
bought them. Replacement-cost coverage will cover the cost of replacing your
belongings new, now.
• UNDERSTAND YOUR POLICY'S LIMITS: Basic renters insurance
policies cap reimbursements, meaning that a diamond ring may be covered for
only $1,200, even if it's worth six times as much. So be sure to buy the extra
coverage you need for pricey items like jewelry, electronics and musical
instruments. Some people even carry riders against identity theft. But extra
coverage adds up quickly so be clear about your priorities.